Karl Kautsky

The Capitalist Class

Chapter IV
Ground Rent

When one speaks of the classes which are steadily becoming the sole property-holders and exploiters, the monopolists of the instruments of production, distinction must be made between capitalists and landlords; and, furthermore, the fact must not be overlooked that to speak of the small holder of land as a landlord is as great a misuse of terms as to speak of the small holder of capital as a capitalist. The capitalist system of production is rapidly extinguishing both of these small holders, and congesting into the hands of a few whatever valuable property still lingers in the hands of the small man.

The land is a peculiar means of production; it is the most necessary of all; without it no human activity is possible; even the sailor and the aeronaut need a place of departure and for landing. Furthermore, it is a means of production that cannot be increased at pleasure. For all this, it must be noted that as yet it has but rarely happened that every inch of ground in any State was actually occupied or used productively by its inhabitants; even in China, with all the thickness and primitiveness of her population, there are still wide stretches or unreclaimed land.

The private ownership of an article so all-essential to life and production as land confers theoretically a preponderating, irresistible power upon him who is vested therewith. To this appearance of things is due the notion that has seized upon some uncritical minds that the only cause of all present misery is private property in land; that the landlord alone sucks up all the increased productivity of both labor and capital; and that his removal, or the clipping of his wings, would restore to the people – both capitalists and workmen – all, or the bulk of, the wealth that directly or indirectly flows from them. This view of things indicates a total blindness to the significance of the capitalist system of production, and the social evolution that underlies it.

Fallacy of the Single Tax Theory

The relation of the capitalist to the landlord is not that of the wage-worker to the capitalist. On the other hand, the capitalist need not “stand and deliver” to the landlord. The days are gone by when “white parasols and elephants mad with pride were the powers of a grant of land.” Such a state of things prevailed under former systems of production, and in such countries as India; but even there they are steadily losing their pristine characteristics. Despite all that landlordism could and did do, the development of the capitalist system of production has conjured up a rival to the landlord of olden days and former social systems – the capitalist. The power he wields makes him at least the equal of the landlord; the two can deal as peers; and in proportion to the fuller development of capital, the scepter, formerly wielded by the landlord class, came to be held by both landlord and capitalist, with a steady tendency to being ultimately wielded by the latter alone.

The power of the landlord is greater or less according to the smallness of the number of landlords, and the greater or lesser facilities which the laws afford for the sale of land. In England both these circumstances contribute to strengthen the power of the land monopolist.

In the United States the attributes of capitalist and landlord are usually blended in the same person. The manufacturer usually owns the land on which his factory is built; the mining company usually owns its own mines; and in the domain of agriculture itself, where the capitalist system of production is now in full bloom, the land of the bonanza farm is owned by the same capitalist concern that cultivates it. For all this it must not be lost sight of that when the capitalist himself is a landlord and operates upon his own land he has not therefore escaped sharing his surplus with the landlord class. In nine cases out of ten, or even a much larger proportion, he has become a landlord only by paying to the previous owner a round sum of money. The annual interest which he would otherwise derive from that purchase money represents the rent he is paying to the landlord – that is, the portion of the surplus which he squeezes out of labor and which he is compelled to share with the landlord class.

Capitalists are Compelled to Share with the Landlords the Wealth Taken from the Working Class

The purchase money or the rent, as the case may be, paid by the capitalist for the land he needs, is the slice of his surplus which he is compelled to share directly with the landlord. But indirectly also does the landlord class appropriate to itself considerable portions of the wealth that would otherwise accrue to the capitalist. It happens this way:

The profits of the capitalist are, as shown above, that portion of the wealth produced by labor and withheld by the capitalist, after he has deducted the sum which he returns to the wage-worker in the shape or wages, to enable the toiler to live, work, and reproduce himself. It follows that the larger the share which the wage-worker needs to live, work, and reproduce himself, the smaller must be the share, called profits, which the capitalist can seize; and vice versa, the smaller the share which the wage-worker needs to live, work and reproduce himself, the larger will be the share, called profits which the capitalist can seize. Anything that will diminish the cost of living – cheaper goods, cheaper rent, etc. – lowers the quantity of wages absolutely necessary to the wage-worker, and as his wages will then tend downward, the share of the wealth produced by him, but seized by the capitalist as profits, is increased; and vice versa, anything that will raise the cost of living – dearer goods, higher rent, etc. – raises the quantity of wages absolutely necessary to the wage worker, and as his wages would then have to rise, the share of the wealth produced by him, but seized by the capitalist as profits, is bound to decrease in proportion. Now, then, the tendency of the necessities of life is to decline in price owing to the increased quantities in which improved methods enable them to be produced. This tendency would tend to lower the quantity of wages required by the wage-worker, to reduce his wages, and, correspondingly, to increase the share of profits left in the hands of the capitalist. But the effect of cheaper commodities upon the downward tendency of wages and the upward tendency of profits is checked by the increasing price of one of the necessaries of life – city land. It is the irony of fate that one of the effects of the capitalist system of production is to crowd people – proletarians – into cities, thereby raising the rent that the wage-worker must pay, and by so much reducing the share of withheld wages which the capitalist can seize as profits. This increased rent, paid by the wage-worker to the landlord class, is the share of which it indirectly deprives the capitalist class.

The quantity of wealth that the landlord ran appropriate from the capitalist class becomes larger proportion as the general demand for land increases, in proportion as population grows, in proportion as the capitalist class needs land; namely, in proportion as the capitalist system of production expands. In proportion with all this rent rises – that is to say, the aggregate amount of wealth increases which the landlord class can slice off, either directly or indirectly, from the surplus that would otherwise be grabbed by the capitalist class alone.